Google Joins JPMorgan in Seeking Software Patent Limits

By Susan Decker -
Feb 8, 2013

A U.S. appeals court specializing in
patent law grappled today with questions about when computer
programs should be eligible for legal protection in a case
that’s divided the judges and the software industry.

Ten judges at the U.S. Court of Appeals for the Federal
Circuit in Washington heard arguments about how to distinguish
software innovations from programs that computerize unpatentable
ideas, seeking what Circuit Judge Pauline Newman called “the
point where one moves from the abstract to the concrete.”

Google Inc., Facebook Inc. and JPMorgan Chase & Co. are
among companies that say patent standards for software are too
lax and lead to expensive litigation. Stricter rules about what
types of software can be patented could make it cheaper and
quicker to weed out lawsuits over patents that cover the use of
a computer to implement a concept.

The broad use of computer software in every industry has
generated interest and debate about the case, with Internet
retailers and financial institutions generally seeking tighter
standards. Technology companies are divided, depending on the
nature of their businesses.

“An idea can be done entirely by the human mind or with a
pen and paper,” Mark Perry, a lawyer with Gibson Dunn in
Washington, told the court. Perry represents CLS Bank
International, which is appealing a ruling that it must face a
lawsuit over software patents. It’s not enough, he said, “to
take an abstract idea while adding the word computer to it.”

Settlement Intermediary

Based on their questions and their past rulings, the judges
seemed divided, said Brad Wright, a patent lawyer with Banner &
Witcoff in Washington who attended the hearing.

The patents in the Federal Circuit case concern a
computerized method for using an intermediary to make sure
buyers and sellers meet their obligations in stock and currency
trading. CLS, which settles about $4.5 billion of foreign-
exchange transactions daily, was accused of infringement in 2007
by patent owner Alice Corp., a Melbourne-based company jointly
owned by National Australia Bank Ltd. and Alice Ventures Pty.

Wright said a decision probably won’t be released for
several months, predicting at least some aspects of the Alice
patents probably will be upheld.

A federal judge in Washington ruled in 2011 that the idea
of using a third party to settle trades isn’t eligible for a
patent, and computerizing the notion didn’t make it patentable.

Specific Method

In a 2-1 decision in July, the appeals court reversed that
decision, ruling Alice’s suit should proceed because the patents
cover “practical applications of the invention.” Today’s
arguments were before all nine active judges plus Circuit Judge
Richard Linn, who wrote the original opinion and is now a senior
judge.

“We’ve not claimed the idea of reducing risk” in the
patent, said Alice’s lawyer, Adam Perlman of Williams & Connolly
in Washington. “We’ve patented a specific method of doing it.”

Circuit judges Timothy Dyk and Jimmie Reyna questioned
whether Alice incorporated use of a computer into a standard way
of doing business.

“A human being could do these steps, even if more
inefficiently,” Dyk said.

Circuit Judge Kimberly Moore said the claims of the Alice
patents cover specific systems and physical components needed to
implement the system.

“This is so far from just a computer doing an abstract
idea,” Moore said.

The U.S. Patent and Trademark Office said the court should
set up a flexible test that looks at whether the computer is
added to the description of an idea to obtain a patent.

‘Not Enough’

“At what step does the hardware or computer become an
inseparable part of the whole?” said PTO lawyer Nathan Kelly.
“If the computer system is just there to make the idea
patentable, that’s not enough.”

Critics say software patents too often reward those who try
to cover any way of performing a computer function, instead of
those who make the products after experimentation and research.

“I can have a great idea for a self-driving car,” Perry
said. “But Google is spending billions of dollars on it and
should get the patent. The person who wrote down the idea and
brought it to the patent office shouldn’t.”

Helping Economy

Google, along with a group that includes British Airways,
Intuit Inc., Twitter Inc., Yelp Inc. and SAP AG, said the
court’s July ruling may keep judges from quickly resolving cases
about patents that shouldn’t have been issued under standards
set in recent Supreme Court cases.

International Business Machines Corp., which has received
the most U.S. patents for the past 20 years, and a lobbying
group whose members include Microsoft Corp. and Apple Inc., said
software needs legal protection because it contributes to the
nation’s economy.

The case is CLS Bank v. Alice Corporation, 11-1301, U.S.
Court of Appeals for the Federal Circuit (Washington). The
lower-court case is CLS Bank International v. Alice Corp.,
07cv974, U.S. District Court for the District of Columbia
(Washington).